What percentages of your projects run over budget or past schedule? It’s very likely that it’s a high percentage. According to research by KPMG, over the past three years only 25% of project came within 10% of deadlines. Additionally, only 31% came within 10% of budgets. With those percentages, it looks like going over budget and behind schedule is the norm in construction.
You know what else is the norm in construction? The traditional design-bid-build delivery model represents the majority of construction projects in the United States. It’s a strong correlation to make, but there are many underlying reasons this is the case.
Table of Contents
Design-Bid-Build = Disjointed Interests
Design-Bid-Build projects begin when a project owner wishes to start a project – whether it is constructing a building or infrastructure project. There are three distinct phases of the project: Design, Bid, and Build. The owner contracts with an architect to design and produce initial set of drawings and specifications. After the design phase, the project enters the bid phase. Using the drawings and specs from the architect, open bidding begins among contractors. In order to develop their bids, the prime contractor also solicits additional bids from subcontractors. After a bid has been selected, the project then enters a design phase.
Design-bid-build seems simple enough. Everyone has their clear swim lane. However, swim lanes have the ability create silos and disjointed interests among the owner, architect, and contractor. The owner contracts separately with a design team and a contractor. Because the contractor and subcontractors have little input on designs, many design and constructability issues arise during the construction phase. Additionally, when owners select contractors based on the lowest bid, the risk on projects increases. Contractors go in with low bids for selection and then hope to incur profits on change orders and additional work.
The construction contracts in design-bid-build leads to risk averse behavior in order to protect each entity’s own interest. For example, designers blame poor quality on contractors. Similarly, contractors blame their issues on design errors or omissions. Either way, the owner is paying more to the contractor to redo work and the designer to update designs in order to meet their expectations. At the heart of the project is everyone’s individual financial interest—which is why design bid build projects tend to go over budget and behind schedule.
Integrated Project Delivery = One Team
Integrated Project Delivery drastically differs from design-bid-build in many different ways to deliver projects on budget and within schedule.
- One Team. From the Beginning: Whereas the owner selects a contractor after the completion of the design phase in design-bid-build, in IPD the owner selects the contractor at the beginning of the project. When selected at the onset of the project, the contractor provides valuable input into the design process.
- Skills-based Selection: Whereas the owner selects a contractor based on lowest priced bid in the design-bid-build model, in IPD the owner selects the contractor based on qualifications and not on price. When selected based on skills, contractors become committed to delivering high quality work versus low cost.
- Multi-party contract: Whereas the owner contracts separately with a designer and contractor, in IPD the owner, designer, and contractor enter into a multi-party contract with a structure of shared risk and reward. With a multi-party contract, all stakeholders are responsible for the successful delivery of the project.
Integrated Project Delivery Improves Response Time, Collaboration, and Duplicate Work
Improve collaboration – At the heart of Integrated Project Delivery is the shared risk and reward. With this model, everyone has skin in the game to deliver the project on time and on budget. By bringing team members together at the beginning of the project, this breeds a spirit of collaboration and team mentality. Everyone delivers their subject matter expertise to collaboratively deliver a design the delivers the best value to the owner. Working collaboratively in complete transparency toward the success of the project enables all team members to reap the benefits of the incentive pool.
Improves response time – Many of the collaboration between IPD team members is achieved through co-location. With everyone co-located, team members can easily collaborate and make decisions faster. There is no waiting for a subcontractor to send an RFI to a general contractor then the general contractor to send the RFI to the architect à then the architect to respond and send the response back to the general contractor à then the general contractor to the subcontractor to proceed. Everyone is in direct communication to improve response time.
Reduces duplicate work – With contractors and designers collaborating on designs, the need to rework drawings is greatly reduced. Additionally, with colocation and improved response time for jobsite issues, the possibility for duplicate work or need for rework is drastically reduced as well.
The Role of Subcontractors in Integrated Project Delivery
Taking integrated project delivery a step forward is the concept of Integrated Labor Delivery (ILD). Integrated project delivery contains many of the important tenets to improve construction. However, a big piece of the puzzle is often missing in IPD projects—the subcontractors.
The General Contractors serve as the master coordinator and scheduler of the trades, while the trade subcontractors perform 80%-100% of the labor. The specialty trades and subcontractors are the experts in constructability and should be included at the onset of project discussion especially the design phase. The ILD model brings subcontractors into the design phase to deliver a new nature for labor. Collaboration between Designers and Subcontractors offer the opportunity for subcontractors to lend their labor aka subject matter expertise for design constructability, target value design, and the ability to leverage offsite construction as much as possible.